Andrew Longhurst, chief executive of the Cheltenham & Gloucester Building Society - part of Lloyds TSB - said the price war had peaked, largely because there was a stirring of activity in the housing market.
Lenders were seeing more new business coming in rather than fighting each other for the remortgages of existing homeowners looking for better deals.
He added: "A number of lenders including ourselves are starting to widen margins again by cutting back on very heavy front-end discounts that have been a feature of the early part of this year."
The latest official figures show that remortgages may be less than 40 per cent of all new loan business, and also declining, as a proportion of total lending, as genuine demand picks up, reinforcing the view that an end to the price war is consistent with a burgeoning housing market recovery.
The statistics also confirm that mortgage discounts may be beginning to narrow. Average building society mortgage rates in April were 0.43 per cent below the average basic rate, while last year the difference was 0.5 per cent.
This week, there was evidence that the latest recovery of the housing market may be firmer than the series of false starts seen over the past five years when the public's lack of confidence in job prospects and the problem of high, negative equity undermined the incentive to move house.
But new figures show the sharpest rise in retail sales,outside the food sector, for eight years, with household goods, clothing and other durable items booming at long last. Through much of the first half of the 1990s, household goods were held back by the depression in the housing market.
One large-scale lender with an eye to off-beat indicators of trends reported that carpet sales - always a good signal of housing market activity - have risen 30 per cent this year.
Turnover in the housing market rose to 99,000 in June, up 4 per cent on June last year and the highest level since the expiring recovery of spring 1995. Sales last year were just 1.13 million, compared with a peak of 2.15 million in1988.
The latest figures from the Halifax Building Society show house prices rose by 4.2 per cent over the year to June, the fastest increase since 1989. Between July 1995 and May 1996 they rose for 10 consecutive months before slipping back slightly in June. Prices in central London have been rising firmly all year.
Another good sign is that first-time buyers accounted for 42 per cent of new mortgages approved by banks in the second quarter, from a low of 38 per cent a year previously.
Despite denials that the government is encouraging a consumer boom by cutting interest rates in the teeth of opposition from Eddie George, Governor of the Bank of England, analysts see increasing signs that a house price surge may arrive just in time for the election.
But Sir Brian Pitman, chief executive of Lloyds TSB said he thought it "extremely unlikely" that house prices would start to rocket again - and if they did it meant that low inflation probably would not hold.
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